Tuesday, January 13, 2009

After Satyam: Is Wipro Next?

The fall of Satyam was supposed to have created a big opportunity for Wipro. The Indian outsourcing powerhouse, a member of India’s Big Three (along with Infosys and TCS), might be well-positioned to scoop up customers defecting from scandal-plagued Satyam. Wipro still might do that. But today the news is not good. Wipro’s stock plunged, down over 9% after the company revealed it, like its beleaguered rival Satyam, was on a World Bank blacklist, barred from doing any business with it for several years.The World Bank says Wipro can’t get any of its work till 2011 (typo fixed Jan 13) as punishment for “providing improper benefits to bank staff.” (The Indian company allowed certain World Bank employees to buy shares during the IPO of the company’s ADRs in New York in 2000.) The World Bank’s statement is uncomfortably similar to one it made against Satyam, which ended up on the blacklist in September for, as one of its sins, “providing improper benefits to bank staff.” Perhaps worse still, at least from a short-term point of view, it turns out Wipro has been on that list for over a year but only revealed the news now because of new disclosure rules. Kudos to Wipro for following those new rules and getting the news out at last. But given how jittery investors and customers are now about India’s outsourcers, nobody is in the mood for unpleasant surprises like this.